After almost two years of disruption, the fashion industry seems to be back on track. Discover the 10 key issues that will shape fashion during 2022, stated by McKinsey.
As 2021 comes to an end, the fashion industry begins to see the light at the end of the tunnel. With the focus on a medium and long-term future, McKinsey and Company and The Business of Fashion have once again compared the different points of view of great leaders in the textile sector to publish The State of Fashion 2022 report.
From preparing for the recovery from the pandemic to the need to integrate large-scale circular materials within the textile sector, this report captures a vision of the most important trends that will shape the fashion industry during the next twelve months.
1. Uneven Recovery
Despite the initial situation, the report states that the fashion industry is set to recover during 2022. Although, this recovery is expected to evolve unevenly depending on the territory. Countries with strong and resilient economic systems will tend to better recover from the stresses caused by Covid-19. While China has already reached pre-pandemic sales levels, the United States is close behind. However, Europe is progressing at a slower pace as a result of pressures from supply chains.
2. Logistics Gridlock
The fashion industry depends on a complex network of supply chains that are in a critical situation. 87% of people surveyed expect that raw material shortages, transportation bottlenecks and rising logistics costs may lead to lower profit margins over the next year.
With logistics gridlock and insufficient resources, brands will have to balance the speed of trade with the need to relieve pressure on the supply chain.
“There is a big opportunity to better match planning and buying to demand, and that’s something that we learned when Covid hit. The second-biggest learning is to build resilience into the supply chain now”.
says Stefan Larsson, Chief executive of PVH Corporation
3. Domestic Luxuries
Luxury shopping has traditionally been linked to tourism. The decrease in international travel and its recovery forecast for the year 2023 means that the luxury market must focus on the national consumer, balance its retail presence at a global level and invest in local channels that allow it to have a greater reach.
One of the consequences of this new paradigm has been the increase in the consumption of emerging national designers whose visibility has benefited from the limitations of the international market.
With the dynamic shift between travel and luxury shopping, high-end brands need to reformulate new strategies to engage both proximity shoppers and long-term inbound tourism, which will mean a reconsideration in product development, marketing and commercialization.
4. Wardrobe Reboot
The rise of social life weakens the athleisure trend after nearly two years as a consumer favorite category. The customer’s investment will be split between items with a higher economic rank, as well as small impulse purchases that will continue to set the market trend for 2022.
For most brands, the demand for new products won’t necessarily mean having a greater supply, but knowing how to use their data to develop products and adjust their inventory to demand. Thanks to the rise of e-commerce, brands must seize the opportunity to collect information from consumers and track changes in dynamics to pay special attention to their behavior.
5. Metaverse Mindset
Online uptime per average consumer has increased. It’s estimated that in 2020, Gen Z spent an average of eight hours a day in front of screens. This, together with the rise of digital environments such as the metaverse, make virtual goods into tools with great potential for the fashion industry.
Market leaders who want to take advantage of this trend will unlock new ways of interacting with the goal of capturing untapped value streams, such as new digital currencies, games, and virtual fashion. Options that offer alternative routes to creativity, community building, and commerce.
Looking ahead, the popularity of NFTs will continue to grow as fashion brands seek new ways of differentiation and launch creative experiments. Crypto fashion will require significant investment in addition to experimentation, brands will need to implement strategies and develop partnerships with agents outside the fashion industry to deliver high-quality content that captures customer attention.
6. Social Shopping
With the stores closed, the use of social media to discover and buy fashion gained momentum during the second quarter of 2020. 74% of consumers say that their purchases are more influenced by social networks than before the pandemic.
The exposure of brands in social media is something common in most markets, however, the next challenge for western social commerce is at the end of the conversion funnel, specifically, when paying for products within the same social network.
To connect brands with consumers, social media giants are stepping up the development of in-app shopping experiences. Instagram launched its shop functionality in 2020 and since then it allows the purchase of products from the application or through a redirect to the brand’s website. Meanwhile, Snapchat is using its augmented reality experience to allow users to virtually try on clothing and accessories. TikTok has expanded its business partnerships by testing live shopping with selected brands. And some platforms, such as Twitch, allow brands to target very specific demographic segments.
As consumers place increasing importance on social media, brands with the ability to unlock the potential of social commerce through quick and agile shopping will be well-positioned to create a new revenue stream.
Over the next few months, many companies in the textile sector will put to the test the possibilities offered by social networks to create seamless shopping experiences from product discovery to payment.
7. Circular Textiles
One of the most important levers of change in the fashion industry to reduce its environmental impact is closed-loop recycling. A system that is beginning to be implemented at scale and that also promises to limit the extraction of virgin raw materials and reduce fashion waste. The fact that takes on special relevance with the imminent entry into force of the waste law in Spain.
As the popularity of circular materials increases in the fashion industry, companies will need to integrate them into the product design phase while adopting large-scale collection and sorting systems. The deployment of industrial processes will reduce prices over the next few years and boost demand for garments made from circular materials.
To maintain a competitive advantage, brands may require a direct investment in recycling facilities. Considering that increasing scale will mean higher capital spending, brands will need to look beyond the comparatively cheaper costs of virgin materials.
While there is an optimistic view that many closed-loop technologies will reach an industrial scale in 2022, fashion leaders will need to address the challenge globally, incorporating circular textile solutions in a wider dimension. If the industry wants to significantly reduce its levels of environmental damage, fashion will also need to eliminate toxic chemicals, decarbonize the supply chain and reduce emissions.
8. Product Passports
In order to promote authenticity, transparency, and sustainability, fashion brands are investing in technologies that allow adding information of interest to products. These product passports consist of a combination of blockchain technologies, which are supported by radio frequency identifiers (RFID), QR codes, or near field communication (NFC). While these new systems are helping companies address the fashion industry’s weakest points such as forgery and the need for more transparent business practices, product passports may become a failed practice to showcase sustainable brand development in case of not being able to guarantee that the data offered by the providers is accurate.
“It’s really important that there’s been a democratic process so we could create a governance structure and a standard that works for both smaller brands and big brands”.
says Timothy Iwata-Durie, Cartier’s global innovation director
9. Cyber Resilience
As the digitization of businesses reaches new dimensions, brands face increased threats from cyberattacks and potential risks related to inappropriate data handling. Information is becoming both a strategic asset and a source of financial, reputational, and operational risk. To meet customer expectations and comply with regulations, brands must establish clear standards for data collection, use, and storage.
On the other hand, companies need to test their cyber resilience, prepare employees for a potential offense, and organize cyber-attack simulations to test their response protocols in real-time.
With the increasing sophistication of cybercrime and increasing pressure from regulation and consumers, brands must act urgently to strengthen their defenses and invest more to make digital security a strategic imperative.
10. Talent Crunch
Over the next year, the fashion industry’s progress on diversity, equity, and inclusion, as well as sustainability, will continue to be the focus.
Listening and responding to these changes will be crucial for brands seeking to attract a new generation of talent, as well as ensuring their relevance within the market.
Companies that have relied for decades on the attraction linked to the industry and the power of their brands to have the best professionals in the textile sector should accelerate their efforts to enrich the work culture. Ensuring that their employees are represented in the processes of decision-making and that the company leads by example when it comes to demonstrating its values.
In the coming years, these actions will make the difference between the brands that manage to have the best fashion talent among their ranks and those that fall behind. Companies must update their talent recruitment and retention strategies to build an increasingly flexible, diverse, and digitized workplace that represents the priorities of all of their employees, from top management to front-line retail workers.
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